USDC rises to become a market maker in Decentralized Finance, potentially replacing USDT as the largest stablecoin on Ethereum.

Recently, an industry analyst expressed his views on the stablecoin market on social media. He pointed out that in the coming weeks, the supply share of USDT on the Ethereum network is likely to fall below 50% for the first time. Meanwhile, USDC is rapidly rising and is expected to become the dominant stablecoin on Ethereum. This change is mainly due to the increasingly important role that USDC plays in Decentralized Finance (DeFi).

Currently, over half of the USDC supply has entered smart contracts, amounting to approximately $12.5 billion. Although this proportion is lower than DAI, in terms of dollar value, USDC is far ahead. It is worth noting that DAI's collateral also includes other assets. These data indicate that USDC has become the most popular stablecoin choice in the DeFi ecosystem.

In the field of Decentralized Finance, lending protocols are the main users of USDC. The three major lending platforms hold approximately 23% of the USDC supply. Among them, a certain decentralized lending platform uses USDC to support the price stability of DAI through its stable module. In the other two lending protocols, users deposit USDC to earn returns.

Recently, a well-known DeFi project announced the establishment of a new company aimed at providing traditional financial institutions with an easy way to enter the DeFi space. The company collaborates with leading cryptocurrency custody service providers and payment technology companies, allowing emerging banks and fintech companies to exchange USD for USDC. These USDC tokens will be deployed in related DeFi protocols with a guaranteed interest rate of 4%. This initiative enables USD holders to conveniently access the yields of the DeFi market while avoiding the complexities of direct interaction with the protocols.

With the launch of these innovative services and a series of DeFi API initiatives surrounding stablecoin issuers, it is expected that more USD liquidity will flow into the DeFi ecosystem. While this may lead to a decline in depositors' yields, it is also expected to promote the widespread adoption of DeFi lending protocols. These protocols have been facing issues with a shortage of USD liquidity, which is one of the main reasons for the high interest rates.

However, with the continuous development of Decentralized Finance, the industry has begun to focus on a new question: to what extent will DeFi continue to rely on centralized stablecoins? While centralized stablecoins have brought liquidity to DeFi and helped solve volatility issues, this is not a long-term solution.

In this regard, the decentralized stablecoin DAI offers us some insights, even though its market share is only 8%. Interestingly, DAI's stabilization mechanism is increasingly reliant on USDC. Currently, there are no other decentralized stablecoin projects that have reached the level of success of DAI, but the industry is actively exploring various decentralized stablecoin design solutions, the most notable of which is to completely eliminate dependence on the US dollar.

Regardless, decentralized stablecoins represented by DAI remain one of the important cornerstones for the healthy development of the DeFi ecosystem.